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Class I railroad carrier Canadian Pacific (CP) said this week that Keith Creel has been named president and COO, effective today. Creel joins CP from Canadian National Railway Company (CN), where he served as vice president and chief operating officer.

“Keith joins CP after a very successful operating career where he rose from a management trainee in the operations department at Burlington Northern in 1992 to becoming EVP & COO at CN in 2010,” said E. Hunter Harrison, CP’s CEO, in a statement. “I have worked with many talented operating people in this industry over the last four decades and Keith is by far one of the best young operating talents that I have ever seen. Canadian Pacific recently began its transformational journey to becoming the best railroad in North America and we look forward to benefiting from Keith’s strong leadership and operational expertise as we move forward.”

Last June, Harrison was named as CP’s president and chief executive office and a member of its Board of Directors. Harrison previously served as present and CEO of Canadian National Railway Company from 202-2009 and president and CEO of the Illinois Central Railroad. During his time at CN, Harrison was widely known for his focus on “precision railroading,” which requires cargo to be ready when rail cars arrive for loading or risk being left behind, as noted in a Wall Street Journal report.

Harrison replaced Fred Green, whom left CN in May wake of a proxy vote by activist investor Bill Ackman, head of Pershing Square Capital Management, and the single largest CP shareholder with a 14.1 percent stake in the company. Tension between CP and Pershing Square had been brewing for several months, with Ackman calling for a proxy vote when the CP board declined to replace Green as CEO.

In a related note to Creel’s appointment at CP, with Creel switching sides from CN to CP, CN announced that it had “settled its differences” with CP and Harrison, which it said ends the outstanding litigation between CN and CP before the Federal Court in Chicago, Illinois. CN said that as per the settlement, CP will not hire certain CN employees until December 31, 2016, with other settlement terms confidential.

CN CEO Claude Mongeau said that this settlement allows CN and CP to focus on their respective agendas and create value for their customers and shareholders.

Tony Hatch, principal of New York-based ABH Consulting, wrote in a research note that Creel’s appointment provides a chance to become CP’s CEO in 2-to-4 years, which he opined is likely the only spot open given the ages, cultures and unique situations in the other six major North American railways. And he added that it solves the big missing piece of succession, given that Harrison is 68 years old and is just beginning the process of changing CP’s culture.

Prior to Harrison’s arrival, CP said that it was successfully executing on its Multi-Year Plan, which was focused on driving operational improvements, and it highlighted some of the inroads the company had made, including: a 45 percent improvement per car miles per day to an all time record; a 23 percent improvement in terminal dwell time to an all time record, and a 25 percent improvement in train speed, among others.

In the fourth quarter, CP profit was down 93 percent to $15 million (Canadian), due largely to labor restructuring and asset impairment charges. And its operating ratio, excluding significant was 74.8 per cent for fourth-quarter 2012, which it said compares favorably to 2011’s operating ratio of 78.5 per cent, and approaching its objective of an operating ratio in the mid-70s.

Analyst Hatch said that in the fourth quarter CP took another step towards “achieving its stated mid-decade goals with an in-line but profoundly improved Q42012 performance, featuring a 370 basis point improvement in the operating ratio–excluding some $318 million in ‘significant items’— charges for labor, PRB and locomotive asset write-downs).” And he wrote that CP seems to be ahead of its pace detailed in the December Investor Days in terms of labor agreements and headcount reductions.
Harrison said in an earnings release that in the fourth quarter CP saw strong operating performance as it continued to implement significant changes to how it runs the railroad.”

He explained that management made a number of hard decisions during the quarter, including booking several significant items and with these decisions behind CP, he said it anticipates record-setting financial and operational results starting in 2013.

About the Author

Jeff BermanGroup News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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